Is it possible to recession-proof a business? With all the chatter in the economic world about the potential of a recession, how do you mitigate your losses? Are their things that you can do up-front that would help you survive a recession? Jim and Jason discuss the ‘dirty word’ in the industry and some steps you can consider implementing before—or when—a recession hits.
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Many young people in the industry who dove into the workforce after 2008 don’t understand what it means to be in a recession. They haven’t lived through one. Those who remember what it felt like hate to talk or think about it. Jim points out that despite the emotion surrounding the word, it needs to be brought back into the vocabulary. Just because you avoid something doesn’t mean it won’t still happen. Jason and Jim emphasize that if you are educated and prepared a recession won’t impact you as much as it could. So what do you do?
Jim notes that every recession he’s lived through “looks and feels a little bit different than the one before.'' The unfortunate reality is that we don’t know when a recession will come, how bad it will be, or how long it will last. When Jason’s Dad, Steve, led his business through a recession—he stopped taking a paycheck for a chunk of time.
If you’re a business owner, you will have to take some hits. It’s inevitable.
Jason’s dad knew he had to protect his business and employees, so he stopped paying himself to get them through the economic downturn. One way to mitigate the harshness of this reality in your own life is to build up a nest-egg. Create a savings account in case of a recession that can see you, your family, and your business through to the other side.
If cutting your pay isn’t enough to mitigate the financial losses, you have to address the elephant in the room: you might have to let someone go. It’s not easy to do, but sometimes it has to be done. It comes with the territory of being a business owner. It may come down to, “Who can we afford to lose?”.
Sometimes, there is a clear path. Steve Zenger had to ‘trim the fat’ in the last recession and fire a few people who were under-performing or unwilling to help them make it through the recession. If you’re not at the point where you need to make some layoffs, a tip to save some money is to reduce overtime. If you can’t afford to pay your team, you certainly can’t afford to pay time-and-a-half.
Jason currently pays rent on three different locations for his business. He questions if a recession hits, could he consolidate locations to reduce overhead? Another option the guys point out is relocating the business somewhere with lower rent.
During the last recession, Jason’s Dad took him out for lunch, and point-blank asked: “What are you going to do about this?”. Jason wasn’t going to sit back and cry. Instead, he developed a passion for sales. If business wasn’t finding him, he was going to do everything possible to bring it in.
A recession is difficult to talk about, but Jim and Jason agree it’s stuff you need to know. A business owner must do everything they can to prepare. To hear the rest of their suggestions regarding surviving a recession, listen to the whole episode of MakingChips!